Kotak Mahindra Bank's Q3 Profit Surges 10% on Higher Lending Income

Kotak Mahindra Bank, one of India's leading private sector lenders, reported a robust 10% year-on-year (YoY) rise in its net profit for the third quarter of financial year 2025, driven by a significant increase in lending income. The bank's standalone net profit, excluding earnings from its subsidiaries, stood at ₹4,701.02 crore in the October-December quarter, up from ₹4,274.02 crore in the same period last year.



The bank's net interest income (NII), which is the difference between what it earns on loans and pays out on deposits, rose by 10% to ₹71.96 billion in the December quarter, compared to the same period last year. This growth in NII can be attributed to the bank's strong loan growth, with advances increasing by 16% in value terms during the quarter. Deposits also grew by 15% during the same period, indicating a healthy balance sheet.

However, the bank's net interest margin (NIM) witnessed a slight contraction, narrowing to 4.93% from 5.22% in the same period last year. This moderation in margins is expected to keep Kotak's core operating profit under check. Analysts had predicted a 34 basis point YoY contraction in NIMs to 5% in Q3FY25, which was in line with the actual contraction observed.

Despite the slight decrease in NIM, Kotak Mahindra Bank's asset quality remained relatively stable. The gross non-performing assets (GNPA) ratio edged up to 1.51% as of December 31, 2024, compared to 1.48% as of September 30, 2024, and 1.68% as of December 31, 2023. The net NPA ratio, however, remained stable at 0.44% as of December 31, 2024, compared to 0.45% as of September 30, 2024, and 0.36% as of December 31, 2023.



In conclusion, Kotak Mahindra Bank's strong performance in the third quarter of financial year 2025 was driven by robust growth in lending income, despite a slight contraction in net interest margins. The bank's asset quality remained stable, indicating its ability to manage risks effectively. As the bank continues to grow its loan book and maintain a healthy balance sheet, investors can expect strong performance in the coming quarters. However, it is essential to monitor the trends in asset quality and margin compression to assess the bank's long-term prospects.